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Labor Market Defies Slowdown Forecasts In Broad Strengthening

The US labor market unexpectedly strengthened in November with pickups in employment and wages, deflating hopes for the Federal Reserve to cut interest rates early next year.

Nonfarm payrolls increased 199,000 last month following a 150,000 advance in October, a Bureau of Labor Statistics report showed Friday. The return of striking auto workers helped boost the count by 30,000. The unemployment rate fell to 3.7% and workforce participation edged up. Monthly wage growth rose more than forecast.

Health care, leisure and hospitality, and government hiring, in addition to the pickup in manufacturing upon the resolution of the United Auto Workers strike, drove the payrolls gain. Other categories showed tepid growth or outright declines, such as retail.

The acceleration in payrolls is at odds with recent reports that have depicted a softer hiring pace, an outcome favored by the Fed as it will help rein in demand and tame price pressures.

The surprise strength supports policymakers’ desire to keep borrowing costs elevated to ensure inflation returns to target.

Fed officials are widely expected to keep borrowing costs at the highest level in two decades when they meet next week. Chair Jerome Powell has repeatedly pushed back against growing bets of rate cuts early next year, stressing that policymakers will move cautiously but retain the option to hike again. Treasury yields rose sharply after the figures.

Average hourly earnings rose 0.4%, matching the biggest monthly advance this year, and were up 4% from November 2022. Earnings for nonsupervisory employees, who make up the majority of workers, also increased 0.4%.

The participation rate — the share of the population that is working or looking for work — rose to 62.8%, driven by men. A further increase in the labor supply could help alleviate wage gains.

This article was provided by Bloomberg News.



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